Algae, a third generation biofuel feedstock, present one of the most attractive renewable fuel opportunities. Algae’s potential arises from its high biomass yield, ability to grow in a range of environments and its effectiveness as a bioremediation agent for CO2 sequestration and waste water treatment. Studies suggest that algae are the only biofeedstock that has the potential to completely replace world’s fossil transportation fuels. As a result, interest in algae as a source of fuel is high, but the fact remains that no one has yet shown that they can economically and reliably transform algae into fuel that significantly reduces our dependence on petroleum-based fuels. While a number of hurdles contribute to this scenario, based on our evaluation of this industry and processes, we have determined the three key hurdles to be: (a) Sub-optimal choice of algae strains/species; (b) cost of photobioreactor (specialized equipment in which algae are cultivated); and (c) cost of harvesting algae from the growth medium. In this review we identify various research efforts attempted to find solutions for the above three problems, evaluate each effort, and present our inferences on the efforts with the highest potential. We believe further improvements in these research efforts could make algae fuels commercially viable.